FDI in retail: Small shops give competition to big retailers

February 27, 2013 13:21 IST

Traditional retailers are giving a strong competition to organised retailers and the decision to permit foreign retailers to open stores in the country will not affect small players in India, the government said on Wednesday.

According to the Economic Survey 2012-13, which was tabled by Finance Minister P Chidambaram in Parliament, as far as small retailers are concerned, organised retail already co-exists with small traders and the unorganised retail sector.

"Studies indicate that there has been a strong competitive response from the traditional retailers to these organised retailers, through improved business practices and technological upgradation," the survey said.

Global experience also indicates that organised and unorganised retail co-exist and grow, it added.

The government has permitted 51 per cent foreign direct investment in the multi-brand retail sector and 100 per cent in single brand. The allowing of FDI in multi-brand retail was strongly opposed by few associations of small retailers saying that it would impact their business and jobs.

Seeking to allay such apprehensions, the survey said FDI in multi-brand retail trade would benefit stakeholders across the spectrum of the supply chain.

"Farmers stand to benefit from the significant reduction in post-harvest losses expected to result from the strengthening of the back-end infrastructure, which would enable the farmers to obtain a remunerative price for their produce," it said.

Small manufacturers will benefit from the condition requiring at least 30

per cent procurement from Indian small industries, as this would enable them to get integrated with global retail chains, it said.

"This in turn will enhance their capacity to export products from India," it said, adding consumers stand to gain the most due to lowering of prices and improvement in product quality.

Implementation of the policy is also likely to lead to greater FDI inflows, quality employment, and adoption of global best practices.

The survey said state governments and union territories would be free to take their own decisions in regard to implementation of the policy of FDI in retail as this is a state subject.

Eleven states and UTs including Andhra Pradesh, Assam, Delhi, Haryana, Jammu and Kashmir, Maharashtra, Manipur, Rajasthan, Uttarakhand and Daman and Diu have agreed to permit establishment of retail outlets under this policy.

The constitution of a high-level group under the Consumer Affairs Ministry has also been announced to look into various aspects relating to internal trade and to make recommendations on internal trade reforms to the government, whenever required.